Hargreaves Drops as U.K. Weighs Banning Some Consumer Fees

(Bloomberg) -- Investment platforms such as Hargreaves Lansdown Plc and Barclays Stockbrokers may lose the right to charge exit fees as the U.K. financial watchdog seeks to make it easier for customers to switch providers.

The Financial Conduct Authority found that consumers who would benefit from a switch can find it difficult and time-consuming to do so, according to a study published on Monday.

Consumers typically don’t shop around when choosing a platform, with 29 percent either not knowing they pay fees or thinking they don’t pay any, the FCA said. Yet 39 percent of those who have invested through platforms said they were price-sensitive. That’s because it’s hard to find pricing information on platforms’ websites and most also have a large number of fees, with different ways of setting prices, the FCA said.

Shares of Hargreaves Lansdown fell as much as 4.5 percent, the most since February, and were down 41 pence at 2,015 pence as of 4:27 p.m. in London.

Hargreaves Lansdown is by far the biggest company in the market with more than 60 billion pounds ($80 billion) of assets under administration in 2016. Other large players in the market include Barclays Stockbrokers, TD Direct Investing, Fidelity Personal Investing and Alliance Trust Savings, according to data compiled by the FCA.

Old Age

The FCA is also looking into the wider savings market and earlier this year published measures designed to ensure asset managers compete more and act in savers’ interests. It’s seeking feedback to help consumers make the right choices before they access their pensions, suggesting changes aimed at improving communication may be proposed.

The work “is driven by our aim to ensure consumers have the best outcomes possible in retirement,” FCA Executive Director Strategy and Competition Christopher Woolard said in a speech on Monday. The agency plans to publish a paper this year looking at the challenges in ensuring fair treatment for different generations, he said.

“The industry will feel it is important the FCA doesn’t strive for unrealistic economic perfection in what is broadly a well served, competitive and innovative market -- with new rules such as MiFID II still bedding in,” Ellie Raven, a spokeswoman for PwC, said by email, referring to the proposals for investment platforms.

Since 2013, the investment platform market has doubled to 500 billion pounds of assets under administration, driven by rising markets and increasing levels of investment, according to the FCA. In the period, users have risen by about 2.2 million accounts, and revenue from retail customers has grown to 1.3 billion pounds, from 750 million pounds.

Consumers with large cash balances are often unaware of the cost of holding these, or of the effect on returns, the FCA said. The agency said it plans to assess whether exiting rules on disclosure go far enough to ensure consumers are making informed decisions.

The FCA’s call for platforms to take a bigger role in policing whether customers are receiving the advice they are paying for could be a challenge to the industry, Dan Mahony, Director in Ernst & Young’s life, pensions and health practice, said in a note. “Providers will need to think carefully about how to implement changes without negatively disrupting existing relationships between customers and their advisers.”

©2018 Bloomberg L.P.